RESEARCH ARTICLE
Spillover Effects of Comment Letters and Risk Management Role of ESG Performance: From the Perspective of Common Auditors
Jiaqi Ning,
Hui Liu,
Ming Jia,
Jiaqi Ning
School of Management, Northwestern Polytechnical University, Xi'an, China
Search for more papers by this authorCorresponding Author
Hui Liu
School of Management, Northwestern Polytechnical University, Xi'an, China
Correspondence:
Hui Liu ([email protected])
Search for more papers by this authorMing Jia
School of Management, Northwestern Polytechnical University, Xi'an, China
Search for more papers by this authorJiaqi Ning,
Hui Liu,
Ming Jia,
Jiaqi Ning
School of Management, Northwestern Polytechnical University, Xi'an, China
Search for more papers by this authorCorresponding Author
Hui Liu
School of Management, Northwestern Polytechnical University, Xi'an, China
Correspondence:
Hui Liu ([email protected])
Search for more papers by this authorMing Jia
School of Management, Northwestern Polytechnical University, Xi'an, China
Search for more papers by this authorFirst published: 10 July 2025
Funding: This work was supported by the National Natural Science Foundation of China (Programme No. 72002171); the Natural Science Basic Research Program of Shaanxi (Programme No. 2025JC-YBQN-968) and the Innovation Foundation for Doctor Dissertation of Northwestern Polytechnical University (Programme No. SOMBC202203).
ABSTRACT
This study examines whether the supervisory effect of comment letters spills over to non-commented firms through common auditors and whether ESG performance mitigates this risk. Using 13,080 Chinese firm-year observations, we find that auditors become increasingly prudent to non-commented clients after others receive comment letters, leading to increased audit fees, delayed reports and higher frequency of going concern opinions. Strong ESG performance mitigates this heightened prudence. Additional analysis shows that comment letter characteristics influence auditor behaviour, and spillover effects enhance non-commented firms' audit quality. Our study underscores the regulatory spillover of comment letters and ESG's role in risk mitigation.
Open Research
Data Availability Statement
The data that support the findings of this study are available from the corresponding author upon reasonable request.
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